20 November 2020
As the globally-watched United States presidential election revealed Joe Biden to be the preliminary victor, many were left wondering how a Biden presidency would impact Bitcoin and cryptocurrency. By assessing Biden’s platform on which he ran and his rumored appointees, the following outcomes are possible:
1. Biden is set to recruit a team of crypto-savvy individuals, projected to be beneficial for Bitcoin.
The Biden campaign has formally announced that Gary Gensler, the former chairman of the Commodity Futures Trading Commission (CFTC), was tapped to lead the agency review team for the Federal Reserve in the upcoming Biden administration. Gensler has previously testified in front of congress about cryptocurrency, rejecting its comparison to Ponzi schemes and asserting its importance as a “catalyst for change”.
Moreover, the first potential appointee for Treasury Secretary is Lael Brainard. Brainard is currently the U.S. Federal Reserve governor who had previously spearheaded the Fed’s research programs into the digital dollar. Brainard’s extensive knowledge in blockchain technology could facilitate cryptocurrency policy creation, which in turn would contribute to the legitimization of cryptocurrency and expand its adoption in global markets. Brainard has also previously stated the importance of the United States “rising to the occasion” to develop a digital dollar considering China’s central bank digital currency (CBDC).
The second proposed name for Treasury Secretary is former presidential nominee Elizabeth Warren. Warren is known for her staunch support of consumer privacy and protection. Her “anti-big tech” stances and criticism of the unregulated initial coin offerings (ICOs) could result in the introduction of policies that provide focus on trade regulations, as well as oversight for cryptocurrency exchanges.
On Vice President-elect Kamala Harris’s team sits Ryan Montoya, the former chief technology officer at the Sacramento Kings — a man who actively oversaw the team’s use of blockchain tools. Montoya is largely seen as the key architect behind the NBA’s most “crypto-friendly” and tech-savvy team, and he is likely to bring similar crypto-friendly sentiments to the Biden/Harris administration.
2. Biden’s response policies to COVID-19 are ideal scenarios for Bitcoin growth.
With COVID-19 infection rates reaching new peaks daily in the United States, the upcoming Biden administration will have to respond with policies and actions that encompass both healthcare and the economy. Incumbent president Donald Trump had previously withheld an economic stimulus until after the election, and a Biden victory now presents greater chances for the $2.2 trillion bailout proposed by democrats to be pushed through. Biden’s win would mean an unprecedented level of government spending awaits. The government increasing the supply of money to support the economy could be beneficial for Bitcoin as this additional fiscal stimulus and the Fed’s accompanying bond purchases create high demands for bonds, which in turn has an inverse effect on yields for bond holders. This creates a situation wherein investors would seek out alternative investments in commodities, such as Bitcoin.
3. Biden’s proposed plans for Social Security could create favorable conditions for Bitcoin.
Throughout his presidential campaign, Biden presented his plan for Social Security, repeatedly calling for boosting the benefits for low-income earners and increasing taxes on higher income brackets. Due to the economic damage brought on by COVID-19, Social Security’s already-dwindling funds are now nearly depleted. While Biden’s plan calls for applying payroll taxes on wages of $400,000 and above, this threshold could potentially drop to an even lower bracket. The market response to this would be investors seeking out alternative areas of investment that have more preferential tax treatment, this would include the diluting of stocks in favor of commodities such as Bitcoin and Ethereum.
4. Confidence in Bitcoin is at an all-time high, and will continue to grow.
Merely one month before the presidential election, the electronic commerce company PayPal entered the cryptocurrency market, allowing its users to buy and sell Bitcoin. This level of wide-scale integration of cryptocurrency is only expected to grow as more and more people and platforms adopt it as the norm. Other financial technology firms such as Square and Microstrategy have also revealed that they bought Bitcoin as part of their cash reserves, giving crypto another vote of confidence in the market. Cryptocurrency also continues to gain popularity in countries with struggling economies, particularly ones with capital control laws. Moreover, developing countries have high levels of grassroots cryptocurrency activity, with many in volatile economies turning to crypto in order to preserve their savings they may otherwise lose through economic or political changes.
5. Bitcoin could continue to operate independently of politics.
Bitcoin came to life under the Obama administration and reached it’s highest levels of $20,000 during Trump’s presidency. Many continue to assert that cryptocurrencies operate independently of the political realm, with that being their most attractive feature. Cryptocurrency is borderless and functions without any institutionalized backing; it is truly a model of decentralized trust. In it’s very design, it is intended to shrug off any market uncertainty and is not reliant on who wins an election.